Successfully Rescinding a Winding-Up Order

In a case that unfolded on May 1, 2018, the Supreme Court of New South Wales ordered the winding up of Day & Night Online Transport Pty Ltd. This was ordered because of the company’s failure to comply with a statutory demand from a creditor, as outlined in section 459C(2)(a) of the Corporations Act 2001 (Cth). However, what followed was a legal journey that ultimately resulted in the rescission of the winding-up order, shedding light on critical aspects of corporate insolvency and the legal processes involved.

Background: The Winding-Up Order

Soon after the winding-up order, the company’s director took action. On May 4, 2018, an interlocutory application was filed with the following orders:

1. Terminate or indefinitely stay the winding-up process, as per section 482(1) of the Corporations Act.
2. Return management and control of the company to the director, in accordance with section 482(3) of the Act.
3. Set aside the orders for winding up and the appointment of a liquidator, invoking regulation 36.16 of the Uniform Civil Procedure Rules (UCPR).

Evidence

The director argued that the failure to comply with the statutory demand resulting from the failure to update the company’s registered office with the Australian Securities and Investments Commission. Consequently, the director claimed they had not received notice of the winding-up application or the creditor’s statutory demand.

Further the company’s accountant gave evidence that the company remained solvent. This was based on the company’s financial position over the last two years.

The Court’s Decision

On May 28, 2018, the Court issued a landmark decision, setting aside the winding-up order. The reasons for this decision include:

1. The director’s swift response in bringing the application to set aside the winding-up order.
2. The director provided a credible explanation for the company’s non-appearance at the winding-up hearing and its failure to respond to the statutory demand.
3. The director had acted diligently by settling the company’s liabilities, which included the liquidator’s fees and costs, as well as the creditor’s outstanding debt.
4. The director did not have any other debts
5. The company was considered to be solvent

How can we help?

The issue of winding up orders can be very complicated. At Chamberlains Law Firm we can help you to further understand this issue and how to overcome any complications.

If you have any questions in relation to winding-up orders, get in contact with our team by phoning us 02 6188 3600.

 

*This article was prepared with the assistance of Annabel Randall*